Students who owe Ivy Tech Community College money will have their tax refunds diverted to cover the debt under a new policy the statewide college system is implementing.

Ivy Tech is asking the Indiana Department of Revenue to divert the refunds through a tax-intercept program that's commonly used to collect unpaid child support.

The move is the latest effort by the college system to collect on money it's owed. Ivy Tech loses out on about $12 million each year because of student-owed debt, which amounts to about 1.5 percent of the college's general fund, Chief Financial Officer Chris Ruhl told The Herald-Bulletin of Anderson. Collection agencies are only able to recover about $1 million a year.

The tax-intercept program, which also is used by Purdue University, has been available for years, but this is the first time Ivy Tech has implemented it, Ruhl said.

Ruhl said most of the money owed is not related to overdue tuition but is instead tied to federal financial aid programs such as Title IV and Pell Grants.

Students who receive such aid and drop a class before attending 60 percent of the 15-week period owe the federal government money. But they actually owe the school money, because Ivy Tech has to pay it back.

Debtors will be notified of the policy and have 30 days to appeal.

From the college's standpoint, the loss of money adds up quickly and can impact its ability to expand its offerings.

"Every dollar paid here is put back into academic services," Ruhl said.

Ivy Tech already bars students from registering for classes if they owe money. Students who owe even a parking ticket or library fine aren't allowed to graduate until they settle their debt.

Ivy Tech also plans to limit the amount of federal money it forwards to students by monitoring bookstore credits so that it pays out what is actually needed.